A well-known banker was recently saying that it is time to review the social security reforms. It is true that the reform made in 2002 and complemented by another law in 2004 left many gaps concerning bank employees’ social security and pension funds. In fact, they left the resolution of difficult issues, such as the amalgamation of auxiliary pension funds, for the future. The new government will have to tackle the politically hot issue sooner or later. In fact, certain bankers raised the issue during the past few days in meetings with the representatives of the Greek Federation of Bank Employees’ Union (OTOE). Yiannis Costopoulos, chairman and CEO of Alpha Bank and the newly elected president of the Hellenic Banks’ Association, indicated that further reform of the funds in the sector is most urgent. The newly appointed head of Emporiki Bank, Giorgos Provopoulos, said that all interested parties should take the initiative to present their proposals in order for talks to proceed «in a constructive manner.» The difficulty in solving the problem is due to two reasons. First, not all banking groups feel the same urgency. The newer banks, which expanded during the 1990s, have fewer liabilities toward main and auxiliary pension funds and are not in any hurry for a global solution. By contrast, the older banks feel this is an issue that creates unequal terms of competition. The second obstacle has to do with the divergence of views among the bankers and the economy and finance minister of the day, who has to take account of the effect any solution will have on public finances and, specifically, on the budget deficit and public debt. Several proposals have been submitted over the past two years. A year ago, Bank of Piraeus Chairman Michalis Sallas submitted to the Ministry of Labor and Social Security a proposal revolving around the issuing of a special 30-year bond. Former National Bank of Greece Deputy Governor Theodoros Pantalakis had submitted a proposal to unify main and auxiliary pension funds. His view was that the problem will not be solved if the State did not contribute funds, as it is doing for pensions handed by the Social Security Foundation (IKA). None of the above proposals went anywhere due to the previous government’s refusal to impose any further burden on the budget. According to sources, neither is new Economy and Finance Minister Giorgos Alogoskoufis willing to commit public funds and absorb part of the burden from employers. The General Confederation of Greek Labor (GSEE) is also opposed to the use of any IKA funds. Solutions geared to individual banks did not succeed because of the lack of consensus. A prime example is Emporiki, which is paying 40 million euros a year toward covering the employees’ auxiliary pension fund deficit. The bank’s main partner, Credit Agricole of France, has made the solution of this problem a precondition for investing further in the bank. IAS will affect results A further difficulty arises with the upcoming obligatory adoption of international accounting standards (IAS) which will oblige banks to show contributions to pension funds as part of their liabilities. The banks are also obliged to make actuarial studies in order to determine future spending on pension funds, and include these numbers as their liabilities, as well. This will definitely worsen their results to the point where the viability of some of these banks may become questionable.